Revenue Increases 504% to $19.3 Million Compared to $3.2 Million During the Same Period
Proforma Revenue Estimated at $26.8 Million
Raising Low End of Guidance – Total Projected Revenue of Approximately $110 Million – $125 Million
Adjusted EBITDA $30 Million – $36 Million
Conference Call and Webcast Scheduled for Today – 4:30 pm ET
DENVER–(BUSINESS WIRE)– Schwazze, (OTCQX:SHWZ) (“Schwazze” or the“Company”), announced financial results for its first quarter year ended March 31, 2021 (“Q1 2021”). During the first quarter of 2021, the Company announced the completion of its acquisition of Star Buds and announced a Q1 2021 revenue increase of $19.3 million compared to $3.2 million during the same period in 2020, representing a 504% increase. Proforma revenue for the first quarter 2021 was estimated at $26.8 million, which assumes that all Star Buds had been acquired on January 1, 2021. The Company’s adjusted EBITDA was $5.8M for Q1 2021. The Company also reported positive cash flow from operations of $1.7 million compared to last year’s loss of $2.5 million.
Same store sales of the thirteen Star Buds dispensaries when compared to last year, prior to taking ownership of the assets, were $18.8M up 38%. Average basket size is $58.79 up 19.5%, and recorded customer visits are 319,800 up 15.8%. The Company does not have Q1 2020 data for the four Mesa Organics stores acquired in April 2020 for comparisons this quarter but expects to present data for these stores in a similar manner after the end of the next quarter.
“We are pleased with our revenue and adjusted EBITDA results. The implementation of our operating system is having a positive impact in key measurable areas. Revenues are up significantly due to an increase in both average basket size and customer visits, and margins are improving through pricing and promotional efforts as well as consolidated purchasing. We are also seeing a marked improvement in growth in our wholesale revenues and margins.” stated Justin Dye, CEO of Schwazze. “Our stated objective is to grow through internal growth and through accretive acquisitions, and I believe thus far, we have demonstrated this successfully. We are now focused on doubling the Company’s revenue projections through organic growth initiatives and additional acquisitions in targeted markets and states.”
First Quarter 2021 Revenue
Total revenue was $19.3 million during the three months ended March 31, 2021, representing an increase of approximately 504%, compared to $3.2 million during the same period in 2020. Retail sales grew to $11.8 million over the quarter from zero dollars the previous year and wholesale operations revenue increased to $7.4 million from 2.5 million compared to the same period last year. Other sales decreased to $0.1 million from $0.7 million. The increase in retail and wholesale revenue is attributed to the acquisition of Mesa Organics in April 2020 and the completion of the acquisition of Star Buds in March 2021. The decrease in Other revenue is due to a reduced focus on consulting.
Total cost of goods and services were $12.1 million during the three months ended March 31, 2021 compared to $2.1 million during the same period in 2020. This increase was due to increased sales of product and a one-time $2.2 million purchase accounting charge for writing up inventory to fair market value.
Gross profit increased to $7.3 million during the three months ended March 31, 2021 compared to $1.1 million during the same period in 2020. Gross profit margin increased as a percentage of revenue from 32.9% to 37.5% mostly driven by the strength of the Mesa Organics and Start Buds acquisitions, adjusted for the one-time purchase accounting the gross margin for Q1 2021 was 48.9%.
Total operating expenses were $8.7 million during the first quarter compared to $5.2 million during the same period in 2020. The higher expenses were due to increased selling, general and administrative expenses from the addition of the dispensaries, professional service fees, and non-cash, stock-based compensation.
Q1 2021 net loss was $3.6 million, or a loss of approximately $0.09 per share on a basic weighted average, as compared to net loss of $1.4 million, or a loss of approximately $0.03 per share on a basic weighted average during the three months ended March 31, 2020.
Q1 2021 adjusted EBITDA was $5.8 million, 30.2% of revenue. This is derived from Net Loss Before Income Taxes and adjusting for Other Income, one-time expenses, merger and acquisition and capital raising costs, non-cash related compensation costs, and depreciation and amortization. See the financial table for Adjusted EBITDA below for details for Q1 2021 adjustments.
During the first quarter, the Company generated positive operating cash flow of $1.7 million and $21.7 million in total cash flow ending the quarter with $23.0 million in cash and cash equivalents.
Nancy Huber, CFO for Schwazze commented, “We are very pleased to report positive operating cash flow. We have stated since the beginning of our transformation to a plant touching business, that we believe a focus on positive cash flow was essential to our business model. Our target for that objective was the completion of the Star Bud acquisition which was met during the quarter.”
Updated 2021 Guidance
The Company is updating the following guidance for 2021 that excludes any unannounced acquisitions. We have revised projections on the low-end of previous revenue guidance, from $105 million to $110 million and adjusted EBITDA up from $28 million to $30 million on the low-end.
New guidance as follows:
- Projected revenue of approximately $110 million to $125 million; and
- Projected adjusted EBITDA, a non-GAAP measure, of approximately $30 million to $36 million.
The Company remains optimistic regarding the full year based upon reported results to date, the completion of the Star Bud acquisition and the integration of the Mesa Organics and Star Bud dispensaries which is proceeding above expectations.
Adjusted EBITDA represents income (loss) from operations, as reported, before tax, adjusted to exclude non-recurring items, other non-cash items, including stock-based compensation expense, depreciation and amortization, and further adjusted to remove acquisition related costs, and other one-time expenses, such as severance. The Company uses adjusted EBITDA as it believes it better explains the results of its core business. The Company has not reconciled guidance for adjusted EBITDA to the corresponding GAAP financial measure because it cannot provide guidance for the various reconciling items. The Company is unable to provide guidance for these reconciling items because it cannot determine their probable significance, as certain items are outside of its control and cannot be reasonably predicted. Accordingly, a reconciliation to the corresponding GAAP financial measure is not available without unreasonable effort.
Q1 2021 Webcast
Investors and stakeholders are invited to participate in the conference call by dialing (201) 389-0879 or listen to the webcast from the Company’s website at https://ir.schwazze.comThe webcast will be available on the company’s website.
Following the webcast, Chief Executive Officer, Justin Dye and Chief Financial Officer, Nancy Huber will answer investor questions. Investors may submit questions in advance or during the conference call itself through the weblink: http://public.viavid.com/index.php?id=144562. This weblink has been posted to the Company’s website and will be archived on the website. All Company SEC filings can also be accessed on the Company website at https://ir.schwazze.com/sec-filings